Photographer: Qilai Shen/Bloomberg

Vanke Plunges After Scrapping Planned Shenzhen Metro Deal

Updated on
  • Proposed purchase of transit firm stake announced in March
  • Plan was terminated as shareholders failed to reach consensus

China Vanke Co. shares plunged after the company said shareholder dissent led it to scrap plans to issue new shares intended to fund the purchase of a stake in Shenzhen Metro Group Co.

The company’s stock fell 3.2 percent in Hong Kong on Monday, capping a seven-day losing streak that is the longest since November 2014. The shares have tumbled 22 percent this month.

Vanke terminated the plan to acquire the stake in the urban-rail transit company and  promised not to plan major asset restructuring plans again over the next month, Shenzhen-based Vanke said in a filing to the stock exchange Sunday. Major shareholders weren’t able to reach an agreement on the issue within the required time frame, according to the filing. Vanke had initially said it would spend as much as 60 billion yuan ($8.6 billion) for the stake, and later said it would pay 45.6 billion yuan.

The shares face additional pressures as shareholders including China Evergrande Group have signaled that they will limit buying shares, Van Liu, an analyst at Guotai Junan Hong Kong Ltd., said in an interview. The company doesn’t plan to be Vanke’s controlling shareholder, Evergrande’s Chief Executive Officer Xia Haijun said at a forum in Guangzhou on Saturday. Investors are concerned insurers may sell Vanke shares, Liu said, as regulators crack down on insurance companies’ purchases of listed shares.

The move from Vanke, China’s largest publicly-traded developer, comes amid a tug-of-war for control with Baoneng Group, its largest shareholder. Vanke’s management questioned the credibility of little-known Baoneng after it emerged as Vanke’s biggest owner, and labeled its approach a “hostile takeover.” Vanke said last December it was planning a share sale, prompting speculation the move was designed to dilute Baoneng’s ownership.

“After the preliminary plan was announced, some of the company’s major shareholders publicly voiced dissent on the transaction,” Vanke said in the filing. “So far, involved parties have yet to reach consensus on the deal’s specific plan."

Baoneng replaced state-owned China Resources Co. as Vanke’s largest shareholder in December last year, sparking a rare public spat that eventually drew closely held Anbang Insurance Group Co. and rival China Evergrande Group into the fray. Vanke has said it welcomed Anbang as an investor.

— With assistance by Gary Gao, and Emma Dong

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